Business Start-Ups Attorneys in Los Angeles, CA

How to Launch Your Business with Prudence and Caution

Los Angeles is an increasing destination for business start-ups
Launching a business could be quite daunting as economy is still not on a sound footing and credit market not yet amenable to lending. Yet, for those entrepreneurs yearning to intelligently and prudently launch their small business, there are ways to make this rather impossible task a manageable one with prudence and caution.

1. HAVE A TRUSTWORTHY RELIABLE ADVISORY BOARD

Instead of asking numerous people their opinions of what you should do and how you should go about it, it is more prudent to assemble an advisory board. The advisory board would consist of experienced entrepreneurs with proven business acumen and highest degrees of trustworthiness and ethics. Assembling your advisory board would be of paramount of importance since if you keep asking disparate experienced entrepreneurs for a long time, you will probably receive some variation of the same advice. This will delay launching your business and erroneously create unfounded doubts in your mind as to feasibility and prudence of your plans. To eschew such problems, it is advisable to rely on your assembly of experts for continued guidance and monitoring of your business.

2. HAVE SUFFICIENT CAPITAL, NOT TOO MUCH NOT TOO LITTLE

Granted, sufficient capital is vague and undefined. What does it mean to have sufficient capital? What is sufficient?

The bottom line is to calculate your start up costs including BUT NOT limited to:

Paying for Renting space

Paying for Buying Equipment

Paying for Buying and Storing Products

Paying for Salaries

Paying for Health Care

Paying for Taxes

Paying for Advertisement

Paying for Insurance

Paying for Utilities

Paying for All Costs Until Your Business Turns Profitable

SALIENT NOTES

A. NON-EXHAUSTIVE LIST

The list is, by no means, exhaustive. There are so many other costs and expenses to consider. As reiterated before, you should have sufficient capital not only for launching your business, but also for being able to sustain your business until your business becomes profitable and is no longer bleeding cash.

B.NOT TOO LITTLE CAPITAL

As much as this is extremely important not to raise or spend too much money on advertisement, trade shows, website and promotions, it is, likewise, extremely important to always, keep some money for rainy day. You need to have sufficient capital to help you get through difficult days.C. NOT TOO MUCH CAPITAL

When investors realize you have not been cautious and prudent with their hard-earned money, they will certainly think twice to dole out more money. This means your business will be bereft of any available capital while prudent cautious investors are deserting you.

3. HAVE A BUSINESS PLAN

For most businesses, devising and implementing a prudent business plan is a sine qua non for survival and ultimately success. Especially, if your business needs to raise significant funds and takes a year or so to turn profitable, investors and others will require a business plan detailing how you plan to operate, spend money, raise money, sustain and grow and return their money with profit.

4. HAVE A TRUSTWORTHY RELIABLE BUSINESS PARTNER

Despite the problems associated with having a partner, launching a solo business is really difficult. Having a well-written agreement would make it possible to partner up with reliable trustworthy people who complement your skills and, to some extent, reduce your responsibility to solely shoulder launching and maintaining your business. Trust, expertise and reliability are the bedrock of a successful partnership.

Writing A Business Plan That Works

Aspiring entrepreneurs with dedication and diligence put together a business plan; however, to their dismay, potential investors do not find the business plan worthy of investment. So, there might be some problems with such business plans.

The following offers some insight into some of the most common problems with business plans.

1. Focus is On Your Product Not The Solution It Offers

This business plan delineates how revolutionary the product is, how wonderfully it integrates high technology and innovation or how efficient would be to produce it at a large scale.

However, the Focus is misplaced. Investors want to see how the products solves a problem of a target group. In fact, investors look for the following:

Define Pain: A clearly defined and compelling problem should be supported with marketing research and testimonials to substantiate the pain is real.

Define People Experiencing Pain: Tell who your target is. Even if there is a small number of people. Be specific. In fact, success in one niche market would serve as a platform to launch it on a larger scale to other targeted groups.

2. A Fraction of the Whole Market Makes Us Successful

This business plan discusses how the product or service would be successful, given its revolutionary design or the expertise of its service provides, only if a fraction of people purchase it. However, this line of reasoning tends to forget the fact that what happens if the very small number of people do not take advantage of product or services large enough so the costs justify the investment. This business philosophy will probably culminate in bankruptcy.

Therefore, it is vital to entrepreneurs to not only rely on secondary research and marketing data, but also go to the field and ask real people about their potential venture. This is hard work but it is worth it.

3. Detailed Spreadsheet Ensures Our Success

Entrepreneurs might put a lot of effort and energy, and rightly so,
into creating a spreadsheet based on simulated economic projections.
However, the real story might be more complicated. In fact, a savvy
investor goes beyond the spreadsheet and might ask the following:

What is the profit margin? How many products or services are to be sold to be profitable?

What is the relationship between high margins and high profit costs? In other words, what are the net profits?

Is the business expected to bring in money in a month or later?

Is now the time to launch this kind of business venture?

4. Everything About Our Business Plan Is Wonderful

Truth is key. Tell investors what could go wrong. Tell them why you think it might take some time to be profitable. Tell them how competitors might react to your entry. Tell them whether your team has the expertise, temperament and resolve to survive. Indeed, be honest.

Learning from “The Social Network” Movie: Tips for Entrepreneurs

Monday, October 11, 2010 by Doron F. Eghbali
The movie about the “purported” genesis of Facebook “The social Network” has reportedly been a relative success in movie theaters. Nonetheless, the movie, irrespective of the debate surrounding its factual veracity, offers insightful and intelligent tips for entrepreneurs. Let us analyze further some of these tips.

1. DREAM BIG AND WILD, YET WITH PRUDENCE

One of the salient ingredients of entrepreneurial success is a well-thought out dream spelled out cogently and intelligently in a business plan. It is great to dream, but the dream MUST be supported with understanding of the business and the costs involved in launching, maintaining and promoting it. Deluded self-confidence coupled with dearth of business knowledge could be catastrophic to business entrepreneurs who spend thousands of dollars launching a business with no coherent plan and no knowledgeable trustworthy personnel.

Most big ideas like, the one in “The Social Network”, start from problems we face in our personal lives and solving them with our known strengths while hopefully making money, too. For instance, if somebody is socially reticent and inward, yet the person has great technological know how, then something like Facebook COULD transpire.

However, as stressed before, not every solution is an objective worth pursuing and not every entrepreneurial aspiration will be financially successful.

3. DREAM WITH RELIABLE FINANCIAL BACKING

Even before a start-up can approachAngels (affluent individual investors) orVenture Capitalists (large institutional investors), the best source is your family and probably friends. Your parents and siblings are the most gracious lenders out there. They love you unconditionally and they loan you the money probably with little or no strings attached. Nonetheless, if you breach the trust, your reputation might be adversely tarnished.

In addition, finding a reliable trustworthy partner, like in “The Social Network” is intelligent and concurrently replete with perils if not done prudently. For instance, you and your wealthy partner should know from the start who owns what and spell out all potential points of friction in an intelligent legally bound agreement. In fact, selection of your business partner is extremely crucial to the survival of your business.

How to Negotiate with Investors for Your Start Up Capital

Every start up needs lots of financial backing to build a brand and bring in customers or clients. Nonetheless, the sine qua non for starting up a business and successfully sustaining it is money. Many start up entrepreneurs wonder what would be the figure they should sacrifice to secure needed capital from investors. Although the answer is virtually different in each case, there are some guidelines to be strictly followed.

SOME GUIDELINES

1. Some Money Now, Some Money Later: Investors seek to value your start up and based on that valuation they decide whether and how much they should lend you money. Almost always, a start up with a website, business plan and entrepreneurs’ aspirations is valued less than a profitable and viable business. As such, investors often ask for a bigger share of the pie in the beginning in the form of equity. This means in addition to low valuation of the start up you have to still give up more equity in your business. As a rule of thumb, you should never give up more than 20 to 30% of equity.

What you do is to raise some money in the beginning with low valuation and more equity largess. However, you will have to raise more equity later when your business has proved to some extent profitable and investors value your business higher.

In fact, if you have to give up more than 20 to 30% of equity in your start up- business to investors, then you had better stay on the sidelines and not launch your start up since at the end your business might be profitable but you will not see the profits.

2. Some Debt Some Equity:It is prudent to think of debt financing along equity financing to the extent possible and prudent. Debt could be straight or convertible. This means investors would have a chance to convert their debt to stocks if and when the company becomes profitable or goes public. The investors feel protected since they are often paid first even if the company goes under. However, you should pay higher than prevailing market interest rates to lure investors. In addition, debt financing might have serious tax consequences and as such your debt/equity ration should stay below 75%. This means you must have at least 25% equity in your start up.

What to Look For In a Potential Employee

Given the relatively high number of qualified people looking for jobs and a relatively improving economy, it behooves employers to know what to look for in a potential employee. Let us review some of the basic characteristics an employee should possess.

1. POSSESSING EXPERIENCE OR LACK THEREOF

One of the seemingly salient factors for a successful employment is experience. Although experience could be the prerequisite for some jobs, this is not always true. First, if the employer aspires to revolutionize an industry and seek talented individuals who are capable and willing to change how everybody else does business, then an inexperienced person – with other characteristics shortly discussed – might be a better fit. In addition, an experienced person comes with lots of baggage which might need special attention and treatment.

In fact, the following traits are more important than experience:

Ability to Learn.

Ability to Get Along with Others.

Ability to Understand Others.

Ability to Respect Others.

Ability to Accept Rejection.

Ability to Follow Proven Methods of Success.

2. POSSESSING CREATIVITY

You want your employee to think outside the box when it comes to problems not encountered before. Your employee needs to be creative enough to successfully, efficiently and legitimately solve a problem without asking you for every detail.

3. POSSESSING RESOLVE

Your employee needs to know the job could be stressful and frustrating at times. In fact, the employee should be willing to tolerate a reasonable amount of stress and frustration as an inextricable part of the job. On the other hand, it is your moral and sometimes legal obligation to avoid a situation that unreasonably places an undue burden on your employee.

Furthermore, your employee should view problems as challenges and not as insurmountable difficulties.

4. POSSESSING HONESTY AND INTEGRITY

Your employees should be forthcoming to you at all times. In fact, being able to trust your employees is extremely important. In addition to entrusting your employees with your business and customer’s financial data, you need to know your employee can deliver bad news to you or provide you the honest reason for some action or inaction.

Your employee should deliver on promises made to you or your customers. The employee should have the integrity to take responsibility for their mistakes and sincerely promise not to commit the same mistake again.

CAVEATS

1. EMPLOYERS ARE AS IMPORTANT AS EMPLOYEES

In fact, it is not just employees who are essential to a successful business. It takes two to tango. If you, the employer, do not respect your employee and do not properly compensate the employee, even the most ideal employee may not help you thrive your business.

2. UNDERSTAND THE IMPORTANCE OF HUMAN NATURE

Just keep in mind: Human nature does not change. So, seek to understand who the employee is and whether you are the employer who can help your employee contribute to the success of your business.

How to Build and Maintain Your Business Credit

It is a daunting and rather desperate situation for small businesses seeking capital injection. While banks have relatively hardened their lending practices and seem reluctant to ease them anytime soon, business owners lack the stringent credit credentials lenders are adamantly asking for. Hence, building your business credit is a salient task. Like building your personal credit, to a great extent, building your business credit takes time, effort, sacrifice and certainly discipline.

BASICS

1. Business Credit Should Supplant Personal Credit

Many start-ups rely on their personal credit history to seek funding for their new venture. While this may seem the only viable option when no business existed to start with, business owners are well advised to develop a business credit to:

Keep their business and personal records and transactions totally separate.

Form LLCs, Corporations or Limited Partnerships to limit and maintain their limited liability to their investment. And,

Legitimize the business in the eyes of lenders.

2. Business Credit Usually Takes Relatively Less Longer Than Personal Credit to Build

The good news is business credit could be built within two years or so as opposed to seven years or so for personal credit. However, this premise is contingent on the following factors shortly delineated.

FACTORS TO IMPROVE YOUR BUSINESS CREDIT

1. Keep and Maintain Your Business Records

Hire an Accountant: After forming an LLC, Corporation or Limited Partnership, hire a knowledgeable, vigilant and ethical accountant. Have the accountant carefully maintain your business records to bring legitimacy in the eyes of prospective lenders. Have the accountant VALIDATE your financial records.

Keep All Your Business Licenses Current: The viability and credibility of your business depends on the whole business operating legitimately. As such, it is important to ensure all your business licenses are current.

2. Conduct Your Business with Credible Vendors or Suppliers

Ensure Your Vendor or Supplier Regularly Reports Your Credit History to Business Bureaus: Although it might seem counter-intuitive to start up your business with vendors or suppliers who regularly report your credit history to business credit bureaus, this practice is crucial in building your business credit.

Register with Business Credit Bureaus: This is a prudent and savvy business move to register with business credit bureaus such as Dan & Bradstreet, Experian and Small Business Financial Exchange. Having a proven track record ,certainly, facilitates obtaining business loans.

Check Your Business Credit Once a Year, At Least: You have heard of checking your personal credit at least once a year. Similarly, checking your business credit is of paramount of importance.

How to Fund Your Start-Up Business

It is very hard to get funding from banks for your start up when you have no or little track record. So, what could you do?

Well. There could be several options.

1. YOUR PERSONAL SAVINGS

Usually, the first source of starting up your own business would be your own cash. However, you should carefully consider the following:

2. FAMILY AND FRIENDS

Probably, the “love money” is the second most important source of funding for entrepreneurs. However, consider the following:

3. CREDIT CARDS

Credit cards could be very dangerous. Always, keep in mind you get the relatively easy money today, but think very hard to have to give it back tomorrow not that easy. In fact, educate yourselves about the potential risks associated with carrying small business cards or personal credit cards.

4. HOME EQUITY LOANS

Now, it is relatively harder to secure home equity loans. However, if you manage to obtain one, ALWAYS remember if your business is unsuccessful and you default on your loan you LOSE your home.

5. GRANTS OR CONTESTS

Although it is very difficult to find free money for your business, if you are diligent and innovative you might find some help. In fact, consider:

Your Age and Family Obligations: Exactly how much you should prudently spend on your business depend on how old you are. If you are in your mid thirties and have a sizable saving, you can afford to spend more generously on your business from your personal savings. However, if you are in your forties and you are the sole breadwinner of the family, you do not have as much discretion and leeway.

Do not Entirely Deplete Your Personal Savings: You might need some of your money for unexpected expenses. In fact, this is very likely your business does not turn profits as you had expected in the first year or so.

Do Not Tap Into Your Retirement Savings: Your retirement savings are sacrosanct. You do not touch them unless you feel absolutely obliged to do so. Not only you will lose an important source of financial security, you will also get penalized with taxes and fees. So, be extremely prudent.

Forewarning Your Family and Friends:Tell your family and friends they may never see their money.

Gift, Loan or Ownership Stake: Make sure your family and friends understand what the money is for. Is it a gift, loan or some kind of investment in your business?

State and Local Government Incentives:You might find some help if you invest in some undeveloped areas or struggling industries.

National Association for the Self-EmployedGrants: You might be lucky to obtain a grant from this association. Every penny counts.

Contests in Niche Industries:Participate in contests held by big companies such as Dell or UPS. You might win cash, equipment or services.

Our Business Start-up Lawyers are Experienced

Our business organization law firm is based in Beverly Hills, Los Angeles where our lawyers have acquired over 80 years of combined experience in legal representation. Our skills and knowledge are a top resource for our clients that has been recognized by industry peers and judges. If you have a business matter specifically involving a business start-up, please take a moment to fill out the form below so that we may get in contact with you.